In today’s issue:

• Passive aggressive investors are not invited
• How to beat the FTSE 100, from within
• How investment bankers manage their own money

Can you increase the returns of your investment portfolio, without increasing its risk?

Most will tell you it’s impossible. After all, more return inherently means more risk… right?

Well, 30 years ago, John Butler helped lead a revolution in the world of finance. By applying ideas recently pioneered in academia, a group of investment bankers were able to create portfolios of investments that generated higher returns for lower risk.

How?

Well, nobody would argue you can eat the ingredients of goulash separately and achieve the same result as when they are combined correctly…

But you need to have just the right amount of each ingredient.

It’s the same with your investment portfolio. If you want to create the best possible concoction, you need to consider how the pieces combine. And how much of each to add.

By analysing the relationship between different combinations of assets, rather than their merits in isolation, a portfolio can become greater than the sum of its parts.

As the academic who pioneered these ideas put it, “diversification is the only free lunch in investing.”

But these days, the finance sector has completely misunderstood Harry Markowitz’s insight. “Diversification” has come to mean passive investing and index investing. A strategy of deliberate ignorance – why I call it “passive aggressive investing”.

In this video, John Butler takes us through how to construct portfolios that really do generate higher returns for less risk by using deliberate forms of diversification. He calls it “risk-weighted optimisation”. And it could be the key to squeezing more returns out of your portfolio, without having to put up with more risk.

It’s also the strategy John uses for his own assets. And what John teaches to his children to manage their own money.

Unfortunately, John isn’t considering adopting any additional children right now – I’ve asked.

But he may be writing a book that reveals the same secrets he taught his children over the years too. More on that, soon.

Until next time,

Nick Hubble
Contributing Editor, Investor’s Daily

The Landfill of History

Bill Bonner, writing from Baltimore, Maryland

Yesterday came more evidence that you can’t protect your way to success. From the news wires:

China’s energy and auto giant BYD has announced an ultra fast EV charging system that it says is nearly as quick as a fill up at the pumps. BYD, China’s largest EV maker, said Monday that its flash-chargers can provide a full charge for its latest EVs within five to eight minutes, similar to the amount of time needed to fill a fuel tank. It plans to build more than 4,000 of the new charging stations across China… Sales of battery powered and hybrid vehicles jumped 40% last year.

You can seal the borders… and tariff everything that crosses… but that won’t stop competitors from coming up with new and better products. WECB:

China Has Developed a Revolutionary Steel Production Method 3,600 Times Faster Without Using Coal

A breakthrough in steel production is reshaping the industry and bringing hope for a greener future. After more than a decade of research, a team of Chinese scientists has developed a new process that’s not only 3,600 times faster than traditional methods but also eliminates the need for coal. This innovation could transform the global steel industry while significantly reducing carbon emissions.

And here’s more… AutoJosh:

Ford CEO Claims That China Is Ten Years Ahead Of The US In Battery Manufacture

CoinTelegraph:

US tech exec warns China is ‘a decade ahead’ on quantum

AI Upload:

Ex-Google CEO warns that China is a decade ahead on AI

EV News:

[China’s] BYD dominates Brazilian EV auto market with 71.4% share

Electrek:

BYD is ‘just getting started’ in Europe with plans to triple its EV market share

The remarkable thing about Trump’s trade war is that there is no real enemy to have a war with. Trade barriers have been coming down for the last 50 years. Worldwide, the weighted average tariff imposed by our top 31 trading partners is just 1.85%. Take out India, and it goes down to 1.6%.

Donald Trump has regaled the nation with stories of the Canadians ‘ripping us off for years’ with tariffs of 300% on US dairy products. That is a provision of the trade agreement negotiated by the Trump administration itself in its last go-round in the White House.

But the high tariffs are only triggered if US exports rise to a threshold level… that they have never reached. Instead, most of America’s exports to Canada arrive duty free. Not exactly something to get worked up about.

Trade is a win-win deal… voluntary and cooperative. The idea is to trade your output for products that are cheaper and higher quality than you can make on your own. You come out ahead. So does the seller.

Tariffs are win-lose… they’re political, a way of taking something away from someone else. The goal is to make those better, cheaper products more expensive so local, crony enterprises can rip off consumers with inferior products at higher prices.

Trade wars make no sense for dynamic, growing, confident economies. But History has her own purposes… Late, degenerate empires must end up on the landfill of history. Wars – even trade wars – help them get there.

Regards,

Bill Bonner
Contributing Editor, Investor’s Daily

For more from Bill Bonner, visit www.bonnerprivateresearch.com